European stocks shrug off trade worries as oil stocks rally

LONDON (Reuters) - European shares rose on Wednesday as oil and mining stocks rallied and investors shrugged off worries over trade tensions between the United States and China.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 7, 2018. REUTERS/Staff

The pan-European STOXX 600 rose 0.5 percent, even though Asian stocks fell after President Donald Trump said the United States was taking a “tough stance” with China on trade.

Oil stocks rose 1.6 percent after Brent prices reached $80 a barrel following a drop in U.S. crude inventories and as sanctions on Iran added to concerns over global supply. Mining shares climbed 1.3 percent.

“We think it is likely that the equity market sell-off, particularly in the European time zone, will slow down or even temporarily reverse,” said RBC strategists.

“While ‘trade frictions’ and a perception of slowing Asian markets as a result are easy culprits, there seems to be a lot of risk priced in at this stage too,” they said.

Dutch biotech firm Galapagos soared 17.6 percent to the top of the STOXX after positive trial results for a drug to treat rheumatoid arthritis.

Zara owner Inditex rose 4.1 percent after the fashion retailer said it expected profit margin growth in the second half.

Salvatore Ferragamo gained 4.1 percent, with traders citing rumors of a possible takeover. The family that controls the fashion group is not interested in selling its stake, a spokeswoman for the group said.

Hermes shares rose 4 percent after the French handbag maker reported record first-half margins. “Hermes delivered a solid set of results... Importantly, the company noted a positive contribution to profits from strong demand in China,” Berenberg analysts wrote.

British energy provider SSE sank 8.3 percent after it warned first-half profit would halve compared with last year, calling its financial performance “disappointing and regrettable”..

Fiat Chrysler rose 4.4 percent after Bloomberg reported that the car maker is seeking more than 6 billion euros for its unit Magneti Marelli from KKR.

Cigarette makers BAT and Imperial Brands were up 5.8 and 3.2 percent respectively after the U.S. Food and Drug Administration said it was considering a ban on flavoured e-cigarettes.

The FDA’s leader announced a number of steps the agency planned to take as part of a broader crackdown on the sale and marketing of e-cigarettes to children.

Traders said the action was not as harsh as expected.

Elsewhere broker research moved some stocks. German utility E.ON fell 3.5 percent after Morgan Stanley analysts cut their target price on the stock.